London Forex Report: Oil Price Declines Persist, China CPI Outperforms

Extended fall in oil prices continues to take a toll on risk sentiments. It appears increasingly challenging for inflation to nudge back up given persistently weaker commodity prices and lack luster demand, implying little scopes for policy normalization/ tightening across most part of the world. Data flow was mixed and mostly downbeat. Preliminary estimate showed the Eurozone economy grew at a slightly slower pace of 0.3% QOQ in 3Q as expected. The USD Index eased 0.18% to 98.47 after trending lower through most trading sessions in the absence of any major catalyst.

EURUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: EUR was subdued, traded yesterday from Tuesday’s low 1.0827 to 1.0901 against USD. The size of move was nothing compared with last Thursday’s 3.1 percent gain after ECB’s disappointing modest easing. Euro-zone third quarter GDP was 1.6%, same as the market forecasts. However, the third quarter Household Consumption was 0.4%, worse than the market expectations. Traders now waiting for further signals while focus will be on next week’s Fed policy review.

Technical: While 1.0790 caps intraday downside corrections expect a grind higher to retest last weeks high. A failure at 1.0790 opens a retest of 1.0725 next

Interbank Flows: Bids 1.08 stops below. Offers 1.0950 Stops above.
Retail Sentiment: Neutral
Trading Take-away: Sidelines

GBPUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: GBP slid further against the USD, caught up in the result of a renewed collapse in oil prices that investors believed it would be harder for the Bank of England to raise interest rates before the end of next year. Another reason hindered the upside of the GBPUSD is the debate whether Britain should stay in the European Union.

Technical:  While 1.5050 caps intraday upside attempts expect renewed downside pressure to retest of last weeks 1.4890’s lows

Interbank Flows: Bids 1.4950 stops below. Offers 1.5050 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

USDJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: Trade remains relatively quiet compared with commodity currencies which moved vigorously. USDJPY dipped to an intra-day low of 122.69 before retesting 123.00 where it was rejected again. 122-124 range persists.

Technical: While 122.50/30 supports downside reactions, market structure remains bullish to test 2015 highs next. A failure at 122 opens a test of 121.40 support next ahead of pivotal 120.

Interbank Flows: Bids 122 stops below. Offers 124 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

EURJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: Japanese economy avoided technical recession, which might deter the BoJ from easing monetary policy further. After all, the number of supporters for quantitative and qualitative easing (QQE) on the BoJ’s board is gradually declining.

Technical:  While 134.80  caps upside reactions expect a retest of 132.50 from above to set the platform for another corrective leg higher.A breach of 134.80 opens a test of 135.70 next.

Interbank Flows: Bids 132.50 stops below. Offers 134.50 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

AUDUSD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Fundamental: An unexpected beat in Chinese CPI overnight has seen a turn higher the commodity complex. Weaker Chinese PPI data though is still weighing on the Aussie which was weaker overnight. Traders look ahead to this evening’s RBNZ rate decision for potential cross flow impact should the RBNZ cut rates further.

Technical: Breach of .7270 supports suggests a move to test the recovery base and broken descending trend line towards .7100, a failure here would suggest a retest of 2015 lows.

Interbank Flows: Bids .7200 stops below. Offers .7450 stops above
Retail Sentiment: Bullish
Trading Take-away: Sidelines

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USDCAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish

Fundamental: USDCAD remains range bound just off yesterday’s session highs where price made its way as high as 1.3620 on sliding Oil prices. Oil managed to stage a small recovery overnight on better China data but is starting to look weak again today.

Technical: Bulls have the ball while 1.3450 supports intraday downside expect a grind higher to test stops above 1.3600. A close below 1.3389 would ease the near term bullish bias and suggest a correction is underway.

Interbank Flows: Bids 1.34 stops below. Offers 1.36 stops above
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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